Magazine article American Banker

Shaping a Pay Plan for Your Bank's Brokers

Magazine article American Banker

Shaping a Pay Plan for Your Bank's Brokers

Article excerpt

Banks' investment sales operations have evolved rapidly during the past several years, and executives are now searching for compensation structures that help achieve their strategic objectives.

The question now is not how much to pay, but how to structure an effective plan?

Compensation plans for sales professionals need to accomplish several important objectives, not all of which are necessarily complementary. Plans should:

*Attract quality people to the program and motivate them to produce at higher levels.

*Retain top sales people, who are often hard to come by and may try to take accounts with them if they leave.

*Compete with Wall Street firms, regional brokerage firms, financial planners, and insurance companies.

*Avoid significant problems within the overall compensation structure of the organization or jeopardize profitability by being excessive.

*Balance the sales professional's individual efforts with the support provided by the bank.

The most common approach to compensation is paying a broker a growing percentage of commissions as production increases.

Several recent industry surveys found that upwards of 70% of all investment sales programs provide full-time salespeople with a relatively small base salary. As production increases, the percentage of commissions typically is boosted in steps, usually ranging from around 20% to as much as 45% or 50%.

A slight variation combines this approach with a quarterly bonus of 1% to perhaps 4% of the broker's total quarterly commissions, with the percentage determined by "production bands. …

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